Question

Which of the following most accurately defines professional skepticism as it is used in auditing standards?

1) The auditor's mindset that includes a questioning mind and a critical assessment of audit evidence.
2) The auditor's mindset that assumes management is dishonest and actively seeks to uncover fraud.
3) The auditor's mindset that assumes management is honest and trustworthy.
4) The auditor's mindset that relies solely on the work of internal auditors.

Answer 1

Professional skepticism in auditing is characterized by a questioning mind and critical evaluation of evidence, rather than presuming dishonesty or full trustworthiness of management.

Step-by-step explanation:

When discussing professional skepticism in auditing standards, it most accurately refers to the auditor's mindset that includes a questioning mind and a critical assessment of audit evidence. This approach is essential in auditing as it involves a balanced, thoughtful attitude that neither assumes dishonesty nor takes management representations at face value. Auditors are trained to seek evidence and evaluate its credibility by questioning assumptions and assertions, thereby maintaining an appropriate level of skepticism. Professional skepticism is a cornerstone of effective auditing, as it compels auditors to investigate further when necessary and recognize the possibility of material misstatement, whether due to errors or fraud.